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Micro-Lending Empowers Entrepreneurs Around The World

Jhuni’s options were limited. The 33 year-old widow had three young children to support. She could sew—a valuable skill in her village—but had no way to turn it into a sustainable business. With no access to capital, her outlook seemed bleak.

That was, until she applied for a loan of 30,000 Indian rupees, or about $550. Soon she had the funds she needed to build a prospering business, and she got it from individual lenders all around the world.

Millions of people like Jhuni the world over lacked access to capital before the advent of microfinance. Microfinance is a financial service designed to provide capital to entrepreneurs and small business owners, typically in developing countries, with much-needed access to capital. Within the last decade, microfinance institutions have provided millions of small loans—or microcredits—to borrowers in need, helping them start or expand their own businesses.

Jhuni’s loan came from Kiva.org, the world’s largest microfinance platform. Founded in 2005 by Matt Flannery, Jessica Jackley, and Premal Shah, Kiva has grown from lending $500,000 in its first year to lending over $1.5 million per week in 2012. In fact, over $456 million in capital has been lent by nearly one million Kiva members to date. And not one of those members is making any money off their loans.

Microfinance loans from organizations like Kiva carry no interest. The lenders, private individuals who come from all walks of life and from all around the globe, provide these loans for one simple reason: a desire to do social good.

“Kiva’s work truly begins where the dirt road ends,” said Kiva president Premal Shah. “We work with our field partners to find people who have been excluded by the traditional lending structures in their countries, and help provide much-needed capital to help them prosper.”

Kiva’s field partners, typically charities and non-profits that work in developing nations, vet, administer, and disburse the loans, as well as provide services like neonatal education, business training, and general health services. These field partners operate in over 200 countries, and it’s through them that Kiva finds and interacts with its borrowers.

When asked who provides loans through Kiva, Shah’s answer was an emphatic: “everyone!”

“We’re creating a culture of empathy,” Shah said. “Kiva represents a huge community of people coming together to do something selfless, and we’re seeing a lot of engagement with young professionals. The common perception of Millennials is selfish and not at all altruistic, but we’re seeing absolutely the opposite. We’re seeing a groundswell of young people engaged in selfless giving. There’s a real desire to contribute to the common good.”

According to Shah, this pervasive commitment to the common good has the ability to reach far beyond just individual entrepreneurs. “The capital that Kiva’s members provide reaches the entire community. It contributes to the ability to pay school fees, local taxes, and even just feeding our borrowers’ families.”

Shah notes that Jhuni’s next goal is to train the girls in her village to become tailors, and to expand her own business by employing them. Shah points to this as the overwhelming power of microfinance: Through small loans made by private individuals, entire communities around the globe can prosper.

And the reach is truly global. Not long ago, a lender in Kenya made a loan to an entrepreneur in Oakland, Calif. “And that,” Shah said, “is how we’re democratizing access to capital.”

Ryan Galloway is a writer and editor based in New York City. He covers multiple aspects of business, technology, and energy.